Asian stocks traded broadly higher last week, buoyed by the sustained rally in US markets. US stocks continued with their steady climb since the start of the new year, gaining slowly but surely. The Dow Jones Industrial Average closed at its highest level since mid-2008 last Thursday (at the end of the Asian trading week) and is now just about 10% off its all-time high.
So far this year, global equities have certainly performed far better than most had initially expected. Investors started off with great caution and higher than average holdings in cash. But it appears they are slowly being lured back into the fray.
Thus far, improvement to the underlying US economy has been the strongest confidence booster. Even though growth is still tepid by most measures, there is growing evidence that the economy is gaining traction over the past few months.
One of the key drivers was the slow but steady strengthening in the job market. The US economy added 243,000 jobs in January, the most since mid-2010, while unemployment dipped to a three-year low of 8.3%. Improved employment prospects are expected to underpin consumer spending, the primary growth driver for the world’s largest economy.
Equally important, US corporate earnings are still growing, which in turn are driving stock prices higher while keeping valuations modest. Company balance sheets are strong, many are flush with cash, and operations lean following rounds of cost saving exercises implemented since the recession.
The improving outlook for the US has so far outweighed lingering concerns in Europe. Indeed, it appears that some investors may have been persuaded that even the worst-case scenario of a Greece exit from the eurozone will not be as disastrous as initially feared, and that measures such as the fiscal compact, establishment of the permanent rescue fund ahead of schedule and unlimited, long-term European Central Bank refinancing operations for banks may have built a sufficient firewall around the crisis.
In short, even though it may still be too early to say that market turbulence is a thing of the past, investor confidence has undoubtedly gained ground over the last few weeks. A steadier global market will be positive for the local bourse, and in particular, higher risks but more attractively valued medium and smaller capitalised stocks.
Interest in lower liner stocks too has been quite robust of late. Trading volume on the local bourse surged to a record 4.39 billion shares last Wednesday, with the bulk of the activities focused on penny stocks.
Among the most actively traded was Naim Indah Corp Bhd. In view of the sharp rise in price and volume for the stock, Bursa Malaysia issued a cautionary note to investors last Thursday. Following this, the company requested a one-day suspension in trading pending a material announcement.
The benchmark index added almost 23 points to finish at 1,561.7 last Friday. Market sentiment appears likely to stay firm in the near term. While smaller cap stocks are attracting renewed interest, gains for big cap blue chips may lag on the back of relatively rich valuations. Indeed, unless earnings results for 4QFY11, to be released over the next two weeks, register significant surprises on the upside, the FBM KLCI may continue to lag the regional turnaround.
Portfolio review
Note that this review is for a four-week period from Jan 16.
Stocks in our model portfolio outperformed the benchmark index over the past month. Total market value for our basket of 20 stocks was up by 3.84% to RM439,850, compared with the KLCI’s 2.53% gain.
Fourteen stocks in our portfolio closed higher while five ended in the red and one traded unchanged. Some of our notable gainers include Pantech Group Holdings Bhd (17.3%), Al-Hadharah Boustead REIT (BSDREIT) (9.9%), MyEG Services Bhd (6.3%) and DiGi.Com Bhd (5.9%). At the other end, Al-Aqar Healthcare REIT (-2.5%), Bumi Armada Bhd (-1.7%) and Bonia Corp Bhd (-4.8%) were among the bigger losers for the period under review.
Pantech shares did well after the company reported stronger earnings in its latest 3QFY12 ending February results. We expect earnings will continue to improve, underpinned by higher spending in the oil and gas sector. Pantech’s valuations remain attractive relative to both the industry and broader market.
Prices for BSDREIT also surged. We attribute this to the sharp rise in the real estate investment trust’s net assets following a revaluation of its properties. Net assets per unit rose to RM1.81 as at end-2011, up from RM1.43 at end-September.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 2.38% to RM698,535. Our total profit is very substantial at RM538,535, of which RM400,948 has already been realised from previous shares sales.
Last week’s gain lifted our model portfolio’s cumulative returns since inception to 336.6% on our initial capital of just RM160,000. We continue to outperform the KLCI, which was up by about 141.4% over the same period, by some distance.
We acquired an additional 5,000 shares in Benalec Sdn Bhd, 10,000 shares in United Malayan Land Bhd (UM Land) and 3,000 shares in Alliance Financial Group Bhd (AFG) for a combined RM34,140. UM Land shares are currently trading at just about 0.5 times net assets of RM3 per share and could be up for a re-rating while AFG is trading at a reasonable price-to-net assets ratio, of 1.7 times, relative to the banking sector.
Our cash holdings were pared to RM224,545, following the acquisitions but continue to account for 32% of our total portfolio value. The relatively high percentage is, primarily, for prudence’s sake.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, February 13, 2012.
So far this year, global equities have certainly performed far better than most had initially expected. Investors started off with great caution and higher than average holdings in cash. But it appears they are slowly being lured back into the fray.
Thus far, improvement to the underlying US economy has been the strongest confidence booster. Even though growth is still tepid by most measures, there is growing evidence that the economy is gaining traction over the past few months.
One of the key drivers was the slow but steady strengthening in the job market. The US economy added 243,000 jobs in January, the most since mid-2010, while unemployment dipped to a three-year low of 8.3%. Improved employment prospects are expected to underpin consumer spending, the primary growth driver for the world’s largest economy.
Equally important, US corporate earnings are still growing, which in turn are driving stock prices higher while keeping valuations modest. Company balance sheets are strong, many are flush with cash, and operations lean following rounds of cost saving exercises implemented since the recession.
The improving outlook for the US has so far outweighed lingering concerns in Europe. Indeed, it appears that some investors may have been persuaded that even the worst-case scenario of a Greece exit from the eurozone will not be as disastrous as initially feared, and that measures such as the fiscal compact, establishment of the permanent rescue fund ahead of schedule and unlimited, long-term European Central Bank refinancing operations for banks may have built a sufficient firewall around the crisis.
In short, even though it may still be too early to say that market turbulence is a thing of the past, investor confidence has undoubtedly gained ground over the last few weeks. A steadier global market will be positive for the local bourse, and in particular, higher risks but more attractively valued medium and smaller capitalised stocks.
Interest in lower liner stocks too has been quite robust of late. Trading volume on the local bourse surged to a record 4.39 billion shares last Wednesday, with the bulk of the activities focused on penny stocks.
Among the most actively traded was Naim Indah Corp Bhd. In view of the sharp rise in price and volume for the stock, Bursa Malaysia issued a cautionary note to investors last Thursday. Following this, the company requested a one-day suspension in trading pending a material announcement.
The benchmark index added almost 23 points to finish at 1,561.7 last Friday. Market sentiment appears likely to stay firm in the near term. While smaller cap stocks are attracting renewed interest, gains for big cap blue chips may lag on the back of relatively rich valuations. Indeed, unless earnings results for 4QFY11, to be released over the next two weeks, register significant surprises on the upside, the FBM KLCI may continue to lag the regional turnaround.
Portfolio review
Note that this review is for a four-week period from Jan 16.
Stocks in our model portfolio outperformed the benchmark index over the past month. Total market value for our basket of 20 stocks was up by 3.84% to RM439,850, compared with the KLCI’s 2.53% gain.
Fourteen stocks in our portfolio closed higher while five ended in the red and one traded unchanged. Some of our notable gainers include Pantech Group Holdings Bhd (17.3%), Al-Hadharah Boustead REIT (BSDREIT) (9.9%), MyEG Services Bhd (6.3%) and DiGi.Com Bhd (5.9%). At the other end, Al-Aqar Healthcare REIT (-2.5%), Bumi Armada Bhd (-1.7%) and Bonia Corp Bhd (-4.8%) were among the bigger losers for the period under review.
Pantech shares did well after the company reported stronger earnings in its latest 3QFY12 ending February results. We expect earnings will continue to improve, underpinned by higher spending in the oil and gas sector. Pantech’s valuations remain attractive relative to both the industry and broader market.
Prices for BSDREIT also surged. We attribute this to the sharp rise in the real estate investment trust’s net assets following a revaluation of its properties. Net assets per unit rose to RM1.81 as at end-2011, up from RM1.43 at end-September.
Including our cash holdings, for which no interest income is imputed, our total portfolio value was up by a lower 2.38% to RM698,535. Our total profit is very substantial at RM538,535, of which RM400,948 has already been realised from previous shares sales.
Last week’s gain lifted our model portfolio’s cumulative returns since inception to 336.6% on our initial capital of just RM160,000. We continue to outperform the KLCI, which was up by about 141.4% over the same period, by some distance.
We acquired an additional 5,000 shares in Benalec Sdn Bhd, 10,000 shares in United Malayan Land Bhd (UM Land) and 3,000 shares in Alliance Financial Group Bhd (AFG) for a combined RM34,140. UM Land shares are currently trading at just about 0.5 times net assets of RM3 per share and could be up for a re-rating while AFG is trading at a reasonable price-to-net assets ratio, of 1.7 times, relative to the banking sector.
Our cash holdings were pared to RM224,545, following the acquisitions but continue to account for 32% of our total portfolio value. The relatively high percentage is, primarily, for prudence’s sake.
Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.
This article appeared in The Edge Financial Daily, February 13, 2012.
